Explain the strengths and weaknesses of the theory of comparative advantage as a justification for free trade. To what extent have the critics of free trade managed to establish the case credible alternatives trade policies?
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Explain the strengths and weaknesses of the theory of comparative advantage as a justification for free trade. To what extent have the critics of free trade managed to establish the case credible alternatives trade policies? Globalisation and free trade are surely one of the most commonly banded-about academic terms in the modern or post-modern "common" world, comprising the mass media and the educational curriculum that we are served today. It is glorified and vilified in equal measure by different peoples of different walks of life. It is frequently verified as playing a very evident part in the everyday lives of basically the entire human race, love it or loathe it. It could be said that globalisation has destroyed many former self sufficient local economies in the third world. Many farmers have been forced to quit their jobs not being able to compete with imported subsidised produce with the impressionable youth deciding to leave their rural homelands in search for a more western lifestyle in the city. Globalisation has led to the proliferation of free trade. It has forced established regional economic trading blocs into competing with each other increasingly more, leading to more regional integration and in turn the setting up and strengthening of free trade areas such as in the European Free Trade Association. ...read more.
The power that the first world exerts over the third world in terms of its economic and industrial dominance, means that its inconceivable to consider the third world catching up if the current trends of globalisation continue. "Local economies are far more likely to produce stable and satisfied communities and to protect nature than any system based on a theoretically constant expansion of production and consumption and the eternal movement of commodities across thousands of miles of land and sea". (Mander & Goldsmith. 1996. p391). A few hundred years ago the whole world relied on their local economies to survive, today the opposite is true. As Mander & Goldsmith have said local economies are far more stable and in many ways and can function better with their own interest at heart. Many of the critics of globalisation have expressed the need for refocusing on local economies (localisation in its original form, not on the continental regional scale). The anti globalisation sector are looking more to dissolving the major interdependencies that exist today between all countries of the world. Instead of the all conquering top-down economy that we see today "localists" are trying to persuade the world to switch to bottom-up focused system. ...read more.
The Zimbabwe and Mugabe situation are an example of this. It has been said that a true global financial authority that looks after the needs of the Third World in particular properly must be established. Ideas such as countries being allowed to trade in their own currency as opposed to the U.S dollar, would lead to third World countries not being so reliant on the global trading system. Tax on regulated financial speculation would help to stabilise the world economy and the control of world capital flows in order to encourage more investment in local communities would both help to regress globalisation. All of these measures that I have outlined could be seen as large steps in halting and regressing globalisation in turn leading to less regional formation in terms of free trade areas and blocs and so less free trade. I believe that comparative advantage is a justification of free trade but I do not believe that free trade should continue in its present form as it has little or no regards for the underdeveloped nations. I have shown that the critics of free trade have put forward some good alternatives although they will surely be hard to implement. ...read more.
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